BIS Issues Report Criticizing Crypto
A recent BIS analysis criticises crypto’s structural weaknesses, stating that a lack of solid nominal anchor, scalability concerns, fragmentation, and uncontrolled intermediaries all pose hazards to the field.
The Bank for International Settlements (BIS) remains sceptical about cryptocurrencies. In a 41-page pre-publication preview of its Annual Economic Report, the financial institution said that “structural faults render the crypto world unsuitable as the foundation of a monetary system” and argued that systems established on central banks provide more reliable and interoperable services.
BIS has shown interest in implementing crypto’s breakthroughs in the areas of programmability, composability, and tokenization into the coding of future Central Bank Digital Currencies (CBDCs).
Principal among the BIS’s objections to the crypto ecosystem was its lack of a solid nominal anchor (which central banks utilise to foster price stability), scalability difficulties, fragmentation, and reliance on unregulated intermediaries.
Agustn Carstens, the general manager of the Bank for International Settlements, told Reuters that “all these weaknesses that were previously identified have pretty much materialised,” referring to the recent stablecoin collapses, crypto lender insolvencies, hedge fund wipeouts, and institutional bailouts that followed Bitcoin’s brutal price drop.
“Based on what we know, it should be relatively controllable,” Carstens said of the crypto catastrophe, suggesting that he did not anticipate the area to cause a worldwide financial disaster. However, there are many things that we do not know.
Carstens had previously remarked that he believed trust to be “the essence of money” and that trustless payment networks could not compete with the services offered by central banks. He anticipates that worldwide standards for CBDC interoperability will be implemented within the next two years.